Thank you, Mr. Chair and committee members.
Let me start by saying that, like you, our members' work and personal lives are inseparable. They live where they work and they work where they live. They are in tune and engaged with their community. They work every day to make local neighbourhoods better places to live, work, and raise a family.
Acknowledging that fact, we have representatives of the local Moncton Real Estate Board and the New Brunswick Real Estate Association at this session. I just wanted to acknowledge their presence.
We understand the budgetary challenges facing the government at this time of global economic uncertainty and the need to drive Canada's recovery through job and economic growth. Moreover, we understand and respect the government's commitment to return to a balanced budget by 2014-15.
In this context, we have spent over a year developing policy proposals with our federal affairs committee, which works on behalf of 100 real estate boards and associations and over 100,000 realtors across the country.
I want to underline that throughout our policy development process, our members wanted to be realistic and respectful of the challenges facing our economy and political leaders. So, first and foremost, our proposals for the 2012 budget are fiscally prudent. They will accelerate our economy, create jobs, and make our communities better at little cost.
The first one, called community reinvestment, is to remove a significant disincentive to selling and reinvesting in rental and income properties. This impediment is holding back a chain reaction of economic, community, and environmental benefits. Many income property owners are reluctant to sell, because doing so would trigger the collection of previously claimed depreciation. This is technically known as capital cost allowance recapture. This reduces funds available for reinvestment and leaves insufficient equity after tax to acquire a property of similar or greater value.
Our proposed solution is simple and does not reinvent the wheel. Income property owners should be allowed to defer the collection of previously claimed depreciation when they sell and reinvest. Large developers already have a similar deferral mechanism. This simply levels the playing field. Over half of the individuals who would benefit from this policy change have net incomes below $50,000.
This is a main street proposal to generate economic and job growth. Income property transactions also create opportunities for tradespeople in renovations and redevelopment. It creates income for industries that mine, harvest, and manufacture construction materials, fees for professionals, as well as tax revenue for all levels of government. In fact the typical income property sale in three of Canada's largest cities generates $287,850 in spinoff benefits and more than one job for every two transactions.
Oftentimes, because of their age, properties held long term to avoid tax consequences are underutilized, energy inefficient, and rundown. Removing this disincentive to reinvestment would turn over properties and allow new investors to enter the market and owners of older properties to build their portfolios. In the process, buildings would be upgraded by their new owners and made more energy efficient through renovations and retrofits. Furthermore, redevelopment would create more rental housing spaces.
As mentioned earlier, we recognize the government's fiscal situation. Indeed, the cost of this proposal would be offset by the collection of other revenue, including capital gains tax from property sales, GST and HST, and income tax from spinoff activity. Furthermore, all deferred tax would be collected by the government in the future, when investors decide not to reinvest, or later through their estates.
We are currently working with a leading economist to pinpoint the exact budgetary impact of this proposal and will report the results to you when we receive them.
Our second proposal relates to home ownership. There is one government program above all others that helps make home ownership a reality, and that's the Home Buyers' Plan. The plan has assisted over two million Canadians since its introduction in 1992. By allowing Canadians to borrow up to $25,000 from their RRSP, the Home Buyers' Plan is effectively a repayable zero-interest loan. It allows Canadian families to save for both retirement and a home, eliminating the need to choose one over the other or greatly dilute both goals.
Unfortunately, inflation steadily erodes its purchasing power. This was recognized by the 2009 budget, which increased the withdrawal limit for the first time in the plan's history. To ensure that tomorrow's homebuyers receive the same value from the Home Buyers' Plan, it needs to be indexed to inflation. We propose indexing in increments similar to the way that tax-free savings accounts maintain their value.
Using Budget 2009 as a starting point, indexing in $2,500 increments would delay implementation until after balanced budget targets are achieved in 2014-15. Based on estimates contained in Budgets 2009 and 2010, the cost of this proposal in 2015 would be about $7.5 million. A further $2,500 adjustment in 2020 would also have a cost of $7.5 million.
We understand that the costing of this program is not a cost unto itself but rather a cost attributable to individuals who are assumed to contribute more to their RRSPs in the year of a home purchase in order to maximize their withdrawal under the Home Buyers' Plan. As a result, the plan has added benefit of encouraging long-term savings.
On a wider scale, the Home Buyers' Plan is a proven creator of jobs and economic growth. In 2009 more than 50,000 homes were purchased using the Home Buyers' Plan, which resulted in $2.1 billion in spinoff spending and more than 17,000 jobs.
Thank you in advance for your consideration. I look forward to your questions. Thank you.
